Is owning a home still the American dream?

Mary and Bill Kamka recently relocated to Sarasota from Illinois, deciding to rent a home in the Palm Aire community near University Boulevard instead of buying right away. As homeownership rates around the nation are falling, the Kamka's join a growing population of renters.

Published: Monday, June 10, 2013 at 2:42 p.m.

Last Modified: Monday, June 10, 2013 at 2:42 p.m.

Mary and Bill Kamka recently relocated to Sarasota from Illinois, deciding to rent a home in the Palm Aire community near University Boulevard instead of buying right away. As homeownership rates around the nation are falling, the Kamka's join a growing population of renters.

STAFF PHOTO / ELAINE LITHERLAND

Facts

CLARIFICATION

This story has been changed to reflect editing changes that appeared in the print version.

Their three-bedroom rental has plenty of space for Adkins' 5-year-old and 10-year-old sons to play. The Gulf Gate neighborhood also is safe, which became even more important last year with the couple's addition of twin baby boys.

But the home is riddled with problems — from ripped patio screens to sagging counter tops and cracks in the interior walls — which their landlord hasn't repaired.

Now paying $1,100 per month, the family would love to instead buy a home of their own. But like many young families these days, a slew of financial challenges has made that goal seem further and further out of reach.

Adkins stays at home as a full-time mother. Although Ritchie's salary is enough to support the family, putting some cash aside each month to buy a home has proved difficult. Tight credit requirements to obtain the necessary financing have not helped.

"It's just tough with our credit and trying to save up for a down payment," Ritchie said.

For now, Ritchie and Adkins' hope for purchasing a house in Sarasota has been set aside.

They are not the only ones.

The American dream of owning a home is slowly fading across the country, as a growing demographic of young families opts to rent either out of necessity or by choice to avoid the headache of a mortgage.

The generation grew up seeing parents fight over a suffocating home loan, with hopes the equity would one day finance a retirement, and seeing the disappointment as those hopes never panned out.

They watched friends and family spend years in grueling battles with a bank, only to wind up losing their dream home — and their credit score.

They have seen real estate values climb to historic heights in 2006, and then swiftly crumble two years later, sending shock waves through the economy.

And with an increasing number of couples, like Ritchie and Adkins, now postponing marriage until their 30s, buying a home has just become less of a priority.

If more join their way of thinking, the fallout could slowly suffocate a state that has long built its economy around housing.

"The real estate industry wants us to think the American dream starts with homeownership, and the baby boomers bought into that," said Patrick Bet-David, a real estate author and chief executive of the financial services firm PHP Agency.

"But the reality is that owning a home is not the American dream. It is just $400,000 worth of debt. Now we're seeing the repercussions from it."

A growing trend

The rate of homeownership among Americans has slowly declined since the onset of the Great Recession, slipping to 65 percent in the first quarter — the lowest ratio since 1995, according to recent data from the U.S. Census Bureau.

There has been a consistent drop from the peak of 69.2 percent during the housing boom of 2004 and 2005. But the current rate also is lower than during the trough of the foreclosure crisis in 2008 and during both recessions of the past two decades, the report shows.

Homeownership in the 17 states including Florida that comprise the South is slightly higher than the national average of 66.5 percent but is dwindling faster than in the United States as a whole.

Many in the housing industry say people will always buy residential real estate if the return compares favorably with other financial investments, such as stocks and bonds.

It is the way generations have established their net worth: buying a house, then accumulating savings over time through steady appreciation, reinvestment and equity.

But recent troubles in the real estate market, and new increases in home prices that stir fears of another bubble, have fewer potential buyers willing to take on the risk.

The slide has been especially prevalent among young families and consumers aged 35 to 44 — a group that has seen a homeownership rate decline of 8.2 percentage points since 2007. That is the sharpest fall of any demographic, Census figures show.

Those under 35 have seen their rate fall almost as fast, as growing student debt holds back millennials that otherwise would have considered buying a home.

In a healthy economy, these younger consumers typically represent first-time homeowners and move-up buyers, two key components of a housing market's long-term stability.

Some economists worry that the shift — if it continues for the long term — could derail Florida's housing recovery, taking construction jobs, merchant revenue and consumer confidence down with it.

Since last year, sales to first-time homeowners nationwide slipped 25 percent, according to economic research from Peak Prosperity.

"Homeownership without a doubt has taken a bit of a black eye through this crisis and downturn," said Sean Snaith, an economist with the University of Central Florida. "The appeal there is not as strong as it once was, when people saw it as a good investment toward retirement."

Effect on rent

Many industry observers attribute a fading homeownership rate to the foreclosure crisis, which left an overwhelming number of Floridians with credit too bruised to immediately buy again.

Many potential buyers also have been hindered by stringent financing requirements, which have made it difficult for the average young family to qualify for a mortgage.

A shrinking supply of homes for sale and rising prices also have made it more strenuous for would-be buyers to find their dream home. Realtors say some have just given up.

The result has left a rental market in Southwest Florida that is healthier than it was before the boom-to-bust cycle started.

As a result of heightened demand, the price of rent in Sarasota and Manatee counties is climbing at one of the fastest rates in the nation and nearly double the U.S. average, at 6.68 percent. Rental occupancy in the region also stands at one of the nation's highest, 96.9 percent, according to the apartment data provider Axiometrics Inc.

"I constantly see young families who used to own homes and now they're choosing to rent," said Laurie Rastovski, a rental agent with Michael Saunders & Co. "For a lot of them, it's because they just can't afford to own."

Companies buying

On the surface, real estate sales do not reflect the shift away from homeownership.

Homes sales across Southwest Florida in the first quarter rose to their best level since the Great Recession. Transactions during April rose 14 percent from the same month in 2012. That has helped median prices in Sarasota County alone grow $42,000 from a year ago, Realtor records show.

But nearly two-thirds of those deals were with retiring baby boomers, who generally pay cash and previously owned a home up north. Those buyers are not helping increase the homeownership ratio as a first-time owner would.

Also, a growing number of recent real estate deals does not involve owner-occupiers.

Since last fall, the foreclosure market has been dominated by institutional investors — such as Wall Street's Blackstone Group and Colony Financial — which have been buying up distressed homes on the auction block for use as rentals.

That trend, too, has made homeownership less obtainable for the average Floridian by taking inventory off the market and pushing prices higher, said Jack McCabe, a real consultant in Deerfield Beach.

"There's a paradigm shift in the market right now, where homeownership is shrinking and rental activity is on the rise," McCabe said. "The number of full-time owner-occupiers buying homes is actually going down. Many young families have seen their parents and grandparents lose their retirement or inheritance from a house, and they don't want to deal with that."

Temporary, but no end in sight

Others, like rental manager Scott Corbridge, see the homeownership drop as a temporary anomaly.

Corbridge said he believes the trend will revert to favor home buying, once many area renters repair their credit or baby boomers affirm their decision to retire here. He still sees renters daily who keep the dream of owning a home alive.

"People are not feeling confident enough right now to put our neck out there," said Corbridge, who rents 300 area homes under the company Sarasota Management & Leasing. "But most people we talk to at some point want to be homeowners again."

That is the case for Bill Kamka, who retired to Sarasota in April with his wife, Mary.

The 69-year-old entrepreneur from a suburb of Chicago knew Sarasota was his place to settle down after just a few days during a recent vacation. He was not so sure about the housing market.

Kamka sold his house in Illinois for $100,000 less than what it was worth just a couple years earlier. He shopped around Lakewood Ranch for a retirement home, but with that loss still fresh on his mind, he opted to rent in Palm-Aire instead of purchasing quite yet.

But he does not rule out the idea of becoming a future homeowner.

"Why rush?" Kamka said. "We love the home we're in."

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